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Post by unagrad85 on Mar 16, 2011 18:14:50 GMT -5
I am thinking about taking early retirement from my job with the State and I wanted to get your opinions about whether I am in good enough of a financial position to retire. I am 49 years old, single, not married, and have no children.
Monthly pension - Roughly 2,494.04 after federal taxes have been deducted (State does not tax state pensions)
My monthly expenses - Mortgage Payment $ 62.00 Property taxes and Ins. 53.98 Cell Phone 100.00 Cable with Internet 81.00 Electricity and Natural Gas 175.00 Health Insurance 225.00 Prescriptions 100.00 Car Insurance 80.00 Total Fixed Expenses 876.98
Net after fixed expenses 1,617.06
Assets:
457 Deferred Comp $125,000 Roth IRA 60,000 Emergency Fund 25,000
I will probably never receive a cost of living adjustment on pension I owe $8,000.00 on my mortgage. This is the only debt I have.
I have had prostate cancer and I'm cancer free now after surgery, but I have had had other health problems and thought about retiring early because of the stress of my job.
Any advice would be appreciated.
Thanks
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busymom
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Post by busymom on Mar 16, 2011 18:43:42 GMT -5
Did I read correctly that your monthly mortgage is $62.00 per month? I guess if it were me, even with that low a monthly payment, I'd try & pay off the mortgage first. But, of course, you have to put your health first. Also, could you take a less stressful job doing something completely different (that you might enjoy) for a time?
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april47
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Post by april47 on Mar 16, 2011 18:46:51 GMT -5
I think you will due well because of your low expenses. When will you be 65 and get medicare? Can you get hold of your deferred compensation if there is a major emergency? With your health history you want to enjoy yourself instead of working. However, all the "experts" here and elsewhere will say you can't afford it and Suze Orman would say "denied' Good luck.
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Gardening Grandma
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Post by Gardening Grandma on Mar 16, 2011 19:14:18 GMT -5
How old are you? Will your health ins continue at the same rate? What do you spend on food?
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Post by unagrad85 on Mar 16, 2011 19:18:28 GMT -5
No, My insurance will go up I'm sure at least 10 percent per year if I'm lucky. I forgot to put my age on question but I'm only 49 years old
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Post by unagrad85 on Mar 16, 2011 19:19:52 GMT -5
Did I read correctly that your monthly mortgage is $62.00 per month? I guess if it were me, even with that low a monthly payment, I'd try & pay off the mortgage first. But, of course, you have to put your health first. Also, could you take a less stressful job doing something completely different (that you might enjoy) for a time?
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Gardening Grandma
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Post by Gardening Grandma on Mar 16, 2011 19:20:54 GMT -5
Thanks. Wow, only 49. That pension would pretty much be your only income for quite a while. And the higher ins would be painful. Any chance you could work part time?
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Post by unagrad85 on Mar 16, 2011 19:24:00 GMT -5
It is 62.00 for 15 years. I just converted Home Equity Line to Fixed Rate Loan of 4.6%, so I could contribute more to deferred comp plan. I will probably pay off sooner, I just thought for now it would help my cash flow if I did retire. Thanks for your response.
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Post by unagrad85 on Mar 16, 2011 19:24:30 GMT -5
Thanks. Wow, only 49. That pension would pretty much be your only income for quite a while. And the higher ins would be painful. Any chance you could work part time?
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Post by unagrad85 on Mar 16, 2011 19:27:04 GMT -5
Thanks for your reply. I think a part time job would something I would have to do. I want to let my Retirement Assets Grow for several years before taking distributions.
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Post by robbase on Mar 16, 2011 19:32:19 GMT -5
how much is the house worth?
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lynnerself
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Post by lynnerself on Mar 16, 2011 19:42:05 GMT -5
I see at least 2 problems already,
You are only 49 and your pension is not inflation adjusted. It will not be worth much in adjusted dollars in 30 years.
Health care insurance could sky rocket before you are 65 and eligible for Medicare.
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Plain Old Petunia
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Post by Plain Old Petunia on Mar 16, 2011 20:09:39 GMT -5
The no cost of living raise on the pension would concern me. It's no reason you couldn't switch to something less stressful, though. Collect your pension and work someplace else.
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cronewitch
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Post by cronewitch on Mar 16, 2011 22:16:52 GMT -5
Since you own a car you will probably want to continue to drive, someday that car will need replaced or repaired and your budget doesn't have a lot of room for saving once you have inflation and health cost could increase.
If you retire at your age you will reduce your SS when you can take it. You can request an estimate based on retiring now to get a idea what you might get. If you work another job it may not pay what you are getting or have the same benefits. Look at what else you might do, your personal abilities and drive. With your pension as a back up you could start a small business like owning rental property or freelance work.
I would probably try to reduce stress keeping the job you have to let your pension grow and get medical insurance. To reduce stress just remind yourself that work is a choice and if they don't like your work you don't really need to care. Use vacation time or call in sick every couple of weeks or take a FMLA leave every year or two to care for a parent if you have reason. Become a slacker as much as you can and it may reduce stress. If the stress can't be reduced you may have to leave for your health but try to reduce stress at work first.
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Deleted
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Post by Deleted on Mar 17, 2011 2:44:13 GMT -5
How advanced is your prostate cancer? How aggressively is it growing? What kind of treatment have you undergone and what is the prognosis? With your low expenses I can see you making it financially for the next 10 years depending on your out of pocket medical. I assume you would be using up your leave until you reach 50? How much leave do you have? You also might explore whether you can become a "red annt" (retired annuitant). This was fairly common in the public agency where I worked (CA). You could work a max of 960 hours per year at your old rate. You wouldn't get any benefits but it might be a way to reduce your workload but keep your mind busy. Many agencies like it because they can save money but also keep the resources of a highly trained employee. I, too, am curious about the value of your house. You may want to see when you could be eligible for a reverse mortgage on your house. I know it won't be before you're 60 but it could be helpful as a way to compensate for inflation until you are eligible for early SS at 65. You can start drawing on that 457 as soon as you separate from service but personally I would treat that and your Roth as your "super" emergency fund. BTW we now know 4 guys who are prostate cancer survivors. One of whom is my brother who was diagnosed at age 47. All are doing very well. Make sure you are treating yourself well and surround yourself with some happy and positive folks. Make sure you find an actively you love/always wanted to do that keeps you from dwelling on your situation.
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qofcc
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Post by qofcc on Mar 17, 2011 7:38:33 GMT -5
Based on the income and expenses you listed, it sounds like you have enough to get by and enjoy a modest lifestyle. Yes, the pension won't be worth much in 30 years, but with your health problems, how active do you really see yourself being in 30 years? It should still be enough to live a nice quiet lifestyle in senior housing. I do think a part-time job with health benefits sounds like a good plan. You could try for one that's low stress and provides a social outlet.
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Gardening Grandma
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Post by Gardening Grandma on Mar 17, 2011 10:18:31 GMT -5
I'm pretty much in agreement with qoff, though to be realistic, I think it may be difficult to find a part time job with health benefits. But if you can find a part time job that will pay enough to cover the increased expense for health ins, that would probably work.
You seem like a pretty frugal person who does not need a lot of material things to get by. That will help you a lot.
I would not pay off the mortgage. The payment is so low that I would not take a chunk out of savings to pay it off. It just would not give you that much more per month.
If you can work part time for the next 13 years, you can draw SS at age 62 (unless the rules get changed). In 16 years, you'll qualify for Medicare (again, unless the rules get changed). So there's some iffiness there. But you already know that life is iffy. And money is not the end all be all. Health is.
FWIW, I retired from a stressful full time job at the age of 54. I worked full time (at another job) for two more years, then had a series of part time jobs until last year when I quit and fully retired. It was amazing how much less stressful the part time jobs were. My attitude was so different.
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Deleted
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Post by Deleted on Mar 17, 2011 10:18:58 GMT -5
I'm very risk-averse and I come from a family of people who live into their 90s, so I'm going to be the pessimist here.
First of all, even with a modest 3% inflation, your pension will be equivalent to about $14,000 a year after taxes in 25 years. That's not a lot to replace a car or a heating system, or buy decent hearing aids or glasses. And typically, inflation tends to hit the things everyone actually needs (food. medical costs and fuel) harder than, say, travel and electronics. Even if your mortgage is paid off your property taxes can increase. You mention a health insurance premium- is that state-provided coverage and will it continue at that level after you retire? Those premiums are also likely to increase faster than inflation.
Are you eligible for SS or Medicare from other jobs, or is this all you get?
A couple of weeks ago, I was in the grocery store and had one of those scary moments that reminded me why I need to save for retirement and not retire prematurely. The guy bagging groceries was well over 70. He was slow. His hands trembled. The checkout clerk had to help him so that we could get out and they could serve the people waiting in line behind us. I felt so bad for him. This is not someone who's working for socialization- this is someone who underestimated what it cost to live in retirement and needs the money- and he's probably going to lose his job.
Don't be that guy 25 years from now. If this is a one-time offer to retire early, you may want to take it- but for heaven's sake, find another job and postpone taking the pension and raiding your savings for as long as possible.
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Post by The Walk of the Penguin Mich on Mar 17, 2011 10:43:27 GMT -5
As others have said, your health insurance is going to be the biggest issue you have. At $225/mo, it sounds like it's being subsidized by your employer right now. By being a state employee, does this mean that this will always be your health premium? Also, some state employees with a pension do not pay into SS. Can you expect to receive SS?
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skubikky
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Post by skubikky on Mar 17, 2011 11:01:26 GMT -5
"this is someone who underestimated what it cost to live in retirement.."
Maybe he knew that he could never "afford" to retire but had no choice. Not everyone who retires can afford it. Many people made a modest income their whole lives, don't have pensions or investments/savings and only had SS. Some are not able to continue to work past their 60's for many reasons. You make it sound like he's an example of someone who made a mistake. Not necessarily. There are countless variables.
On the other hand, I know a number of people who are in their late 70's and 80's and continue to work. My Mom is 77, and continues to work 3 days a week. There are people 10 years younger than she is who aren't capable of working due to health issues. The variability ofthose that are able bodied, if you will, once you get into the elderly years, is tremendous.
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Deleted
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Post by Deleted on Mar 17, 2011 11:38:15 GMT -5
Maybe he knew that he could never "afford" to retire but had no choice.<snip>On the other hand, I know a number of people who are in their late 70's and 80's and continue to work. You're right- one of the reasons SS is having worse cash flow problems than expected lately is that people in their early 60s are losing their jobs and they can't find anything else so they start collecting SS early. It sounds like the OP has somewhat of a choice, though, whether it's staying at his current job or taking the retirement package but finding another job for 10 or 15 years. In his place (but not knowing the full extent of the health problems he mentioned), I'd choose to keep working. As for working in your later years, I was at a conference last week and ran into a quite a few people who started in my profession (casualty actuarial work) earlier than I am and was encouraged to find how many are only semi-retired. There seems to be a decent amount of opportunity in part-time gigs, either consulting or part-time jobs with companies, for people in my field who want to spend some time traveling and enjoying their grandchildren but enjoy the business so much they want to keep active. That's what I hope to do, but at 58 I want to work full-time for 6 or 7 more years if I can.
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Gardening Grandma
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Post by Gardening Grandma on Mar 17, 2011 11:50:50 GMT -5
Just a note on working part time after retirement. I had a number of part time jobs over a 10 yr period. It was not difficult to find part time work, provided I left my ego at home. I never made more than $10/hr at any of them. It irritated DH that I would accept so little, but that was (and is) the reality. So unless your skills are in really high demand, don't expect to make the same hourly amount as pre-retirement.
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resolution
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Post by resolution on Mar 17, 2011 12:35:29 GMT -5
In your situation i would probably find another job and then retire from the first one. Depending on how in demand your field is, you could be making similar money and also bringing in the $2400 on top of that. A few years of that could add significantly to your retirement savings. If you opted for a less stressful or a part time job you would still have some additional income to supplement your pension.
One thing to consider is how much money are you actually earning by continuing to work. How much does your potential pension increase for each year that you stay? One of my friends recently retired because she figured out that she was working for nothing when she compared her pension amount against her salary minus mandatory pension contributions, FICA and some other deductions. She got a part time job working for her son's business and babysits two days a week. She is a lot more relaxed and happy.
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Post by unagrad85 on Mar 17, 2011 13:15:53 GMT -5
Since you own a car you will probably want to continue to drive, someday that car will need replaced or repaired and your budget doesn't have a lot of room for saving once you have inflation and health cost could increase. If you retire at your age you will reduce your SS when you can take it. You can request an estimate based on retiring now to get a idea what you might get. If you work another job it may not pay what you are getting or have the same benefits. Look at what else you might do, your personal abilities and drive. With your pension as a back up you could start a small business like owning rental property or freelance work. I would probably try to reduce stress keeping the job you have to let your pension grow and get medical insurance. To reduce stress just remind yourself that work is a choice and if they don't like your work you don't really need to care. Use vacation time or call in sick every couple of weeks or take a FMLA leave every year or two to care for a parent if you have reason. Become a slacker as much as you can and it may reduce stress. If the stress can't be reduced you may have to leave for your health but try to reduce stress at work first.
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Post by unagrad85 on Mar 17, 2011 13:23:01 GMT -5
Hi, Thanks for taking time to respond to my question. Your suggestions were very helpful to me. I think I will stay in my job and do a better job of dealing with stress. The way the State is broke, we will probably go to furlough's anyway. I just learned the insurance board is increasing insurance premiums for active and retired employees starting in October. I am cancer-free now from Prostate cancer and just need to be more thankful for what I have. Thanks again
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Post by unagrad85 on Mar 17, 2011 13:25:32 GMT -5
How advanced is your prostate cancer? How aggressively is it growing? What kind of treatment have you undergone and what is the prognosis? With your low expenses I can see you making it financially for the next 10 years depending on your out of pocket medical. I assume you would be using up your leave until you reach 50? How much leave do you have? You also might explore whether you can become a "red annt" (retired annuitant). This was fairly common in the public agency where I worked (CA). You could work a max of 960 hours per year at your old rate. You wouldn't get any benefits but it might be a way to reduce your workload but keep your mind busy. Many agencies like it because they can save money but also keep the resources of a highly trained employee. I, too, am curious about the value of your house. You may want to see when you could be eligible for a reverse mortgage on your house. I know it won't be before you're 60 but it could be helpful as a way to compensate for inflation until you are eligible for early SS at 65. You can start drawing on that 457 as soon as you separate from service but personally I would treat that and your Roth as your "super" emergency fund. BTW we now know 4 guys who are prostate cancer survivors. One of whom is my brother who was diagnosed at age 47. All are doing very well. Make sure you are treating yourself well and surround yourself with some happy and positive folks. Make sure you find an actively you love/always wanted to do that keeps you from dwelling on your situation.
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Post by unagrad85 on Mar 17, 2011 13:32:48 GMT -5
Thanks for your reply to my question. I'm happy that your brother is doing well with the prostate cancer. I had my prostate removed in December of 2009 and I had a Pet Scan done in February of this year after the Doctor thought mine had returned and it showed no signs of cancer. I think it makes more sense to stay with my job and keep investing, increasing pension amount, and to keep my insurance. The State is broke and there are not any decent jobs near where I live. I'm going to take your advice and enjoy life more and surround myself with positive people. Thanks again
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Gardening Grandma
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Post by Gardening Grandma on Mar 17, 2011 16:03:50 GMT -5
Unagrad85 Thank you for the update.
DO look for ways to mitigate the effects of the stress in whatever way works for you whether it's a hobby, friends, family, yoga or whatever.
Do take care of yourself. And best of luck! GGma
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